Rachel Reeves has avoided ruling out future tax rises after admitting the government’s concessions on its welfare reforms had been “damaging”.
The government narrowly avoided a major Commons defeat on Tuesday in the wake of a backbench rebellion after it performed a U-turn on plans restrict eligibility for the personal independence payment (PIP).
But as she faced questions about how the climbdown would affect the Treasury, the chancellor warned there would be “costs to what happened”.
The original welfare proposals had been part of a package that ministers expected would save up to £5bn a year – with economists warning that tax rises are now likely to plug a gap left by the concessions to rebels.
Ms Reeves said: “It’s been damaging. I’m not going to deny that, but I think where we are now, with a review led by [disability minister] Stephen Timms, who is obviously incredibly respected and has a huge amount of experience, that’s the route we’re taking now.”
Sir Keir Starmer has said the government is still committed to welfare reform, but ministers will now wait for the conclusions of the Timms review before implementing changes to PIP.
The fallout threatens to cause lasting damage to morale in Labour ranks, with some MPs calling for a reset in relations between the parliamentary party and the leadership before fractures widen.
Images of the chancellor crying in the Commons on Wednesday also spooked the financial markets and led to questions about her future, though a Treasury spokesperson said the tears were the result of a personal matter and Downing Street said she would remain in post.
In an interview with The Guardian, Ms Reeves said she had never considered resigning, adding: “I didn’t work that hard to then quit.”
She said she had gone to Prime Minister’s Questions because she “thought that was the right thing to do” but that “in retrospect, I probably wished I hadn’t gone in… [on] a tough day in the office”.
